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on Cognitive and Behavioural Economics |
| By: | David K Levine |
| Date: | 2010–09–12 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:661465000000000155&r=cbe |
| By: | Jingjing Zhang; Marco Casari |
| Abstract: | This paper studies how groups resolve disagreement in lottery choices. In an experiment, subjects submit individual proposals, exchange chat messages, and must reach unanimity. Overall, group choices are more coherent and closer to risk neutrality than individuals’. The proposal of the minority prevails in about one instance out of five. About one third of the groups do not reach immediate agreement after communication. In these groups, extrovert subjects are more likely to lead the group outcome than confused or conscientious subjects. The amount, equality and timing of chat messages help us to predict which choice prevails in the group. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:506&r=cbe |
| By: | Marco Casari; Jingjing Zhang; Christine Jackson |
| Abstract: | In a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to group learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement within a group, what prevailed was not the best proposal but the one of the majority. Groups underperformed with respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation. We draw general lessons about when to employ groups instead of individuals in intellectual tasks. |
| Keywords: | Winner’s curse, takeover game, group decision making, communication, experiments |
| JEL: | C91 C92 D81 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:504&r=cbe |
| By: | Timothy N. Cason; Roman M. Sheremeta; Jingjing Zhang |
| Abstract: | Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency in games with Pareto-ranked equilibria. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing intra-group communication leads to more aggressive competition and greater coordination than control treatments without any communication. On the other hand, allowing inter-group communication leads to less destructive competition. As a result, intra-group communication decreases while inter-group communication increases payoffs. Our experiment thus provides evidence that communication can either reduce or increase efficiency in competitive coordination games depending on different communication boundaries. This contrasts sharply with experimental findings from public goods and other coordination games, where communication always enhances efficiency and often leads to socially optimal outcomes. |
| Keywords: | Contest, between-group competition, within-group competition, cooperation, coordination, free-riding, experiments |
| JEL: | C70 D72 H41 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:505&r=cbe |
| By: | Kontek, Krzysztof |
| Abstract: | This paper presents a review of adaptation concepts at the evolutionary, environmental, neural, sensory, mental and mathematical levels, including Helson’s and Parducci’s theories of perception and category judgments. Two kinds of adaptation can be clearly distinguished. The first, known as level adaptation, refers to the shift of the neutral perception level to the average stimulus value. It results in a single reference point and stimuli changes represented in absolute terms. This concept is employed by Prospect Theory, which assumes that gains and losses are perceived as monetary amounts. The second kind of adaptation refers to the adjustment of perception sensitivity to stimuli range. It results in two reference points (minimum and maximum stimulus) and stimuli changes perceived in relative terms. Both range adaptation and range relativity are well documented phenomena and have even been confirmed by the creators of Prospect Theory. This makes room for another decision making theory based on the range relativity approach. As shown by Kontek (2009), such a theory would not require the concept of probability weighting to describe lottery experiments or behavioral paradoxes. |
| Keywords: | Adaptation-Level Theory; Range-Frequency Theory; Prospect Theory |
| JEL: | D81 C91 D87 |
| Date: | 2010–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25169&r=cbe |
| By: | Steffen Andersen; John Fountain; Glenn W. Harrison; Arne Risa Hole; E. Elisabet Rutström |
| Abstract: | We propose a method for estimating subjective beliefs, viewed as a subjective probability distribution. The key insight is to characterize beliefs as a parameter to be estimated from observed choices in a well-defined experimental task, and to estimate that parameter as a random coefficient. The experimental task consists of a series of standard lottery choices in which the subject is assumed to use conventional risk attitudes to select one lottery or the other, and then a series of betting choices in which the subject is presented with a range of bookies offering odds on the outcome of some event that the subject has a belief over. Knowledge of the risk attitudes of subjects conditions the inferences about subjective beliefs. Maximum simulated likelihood methods are used to estimate a structural model in which subjects employ subjective beliefs to make bets. We present evidence that some subjective probabilities are indeed best characterized as probability distributions with non-zero variance. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2010-14&r=cbe |
| By: | Loukas Dalafoutas; Martin G. Kocher; Louis Putterman; Matthias Sutter |
| Abstract: | We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjects’ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations. |
| Keywords: | equality; efficiency; voluntary contribution mechanism; incentives; experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2010-13&r=cbe |
| By: | Muller, L.; Ruffieux, B. |
| Abstract: | The paper considers the external validity of the growing set of literature that uses laboratory auctions to reveal consumers' willingness to pay for consumer goods, when the concerned goods are sold in retailing shops through posted prices procedures. Here, the quality of the parallel between the field and the lab crucially depends on whether being informed of the actual field price influences a consumer's willingness to pay for a good or not. We show that the elasticity of the WTP revision, according to the field price estimation error, is significant, positive and can be roughly approximate to one quarter of the error. We then discuss the normative implications of these results for future experiments aimed at eliciting private valuations through auctions. |
| Keywords: | EXPERIMENTAL ECONOMICS;WILLINGNESS TO PAY;AUCTION;POSTED PRICE;VALUE ELICITATION;CONSUMER BEHAVIOR |
| JEL: | C91 D44 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:201003&r=cbe |
| By: | Neil J. Buckley; Stuart Mestelman; R. Andrew Muller; Stephan Schott; Jingjing Zhang |
| Abstract: | Schott et al. (2007) have shown that the “tragedy of the commons” can be overcome when individuals share their output equally in groups of optimal size and there is no communication. In this paper we investigate the impact of introducing communication groups that may or may not be linked to output sharing groups. Communication reduces shirking, increases aggregate effort and reduces aggregate rents, but only when communication groups and output-sharing groups are linked. The effect is stronger for fixed groups (partners treatment) than for randomly reassigned groups (strangers treatment). Performance is not distinguishable from the no-communication treatments when communication is permitted but subjects share output within groups different from the groups within which they communicate. Communication also tends to enhance the negative effect of the partnered group assignment on the equality of individual payoffs. We use detailed content analysis to evaluate the impact of communication messages on behavior across treatments. |
| Keywords: | Common pool resources, communication, coordination, cooperation, freeriding, behavior in teams, partners and strangers, experiments |
| JEL: | Q20 C92 C72 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:503&r=cbe |
| By: | Jacob Ladenburg (Danish Institute of Governmental Research); Jens Olav Dahlgaard (Danish Institute of Governmental Research); Ole Bonnichsen (Institute of Food and Resource Economics, University of Copenhagen) |
| Abstract: | The application of stated preference methods rests on the assumption that respondents act rationally and that their demand for the non-market good on the hypothetical market is equal to what their real demand would be. Previous studies have shown that this is not the case and this gap is known as hypothetical bias. The present paper attempts to frame the description of the hypothetical market so as to induce more “true market behaviour” in the respondents by including a short Cheap Talk script. The script informs respondents that in similar studies using stated preference methods, people have a tendency to overestimate how much they are willing to pay compared to their actual (true) willingness to pay. Applying a two-split sample approach to a Choice Experiment study focusing on preferences for reducing visual disamenities from offshore wind farms, the Cheap Talk script is found to be a preference mover, but does not affect preferences significantly. Significant effects are found when relating the effect of the Cheap Talk script to the cost levels of the alternatives, in that female respondents are found to choose higher cost alternatives less frequently when presented with the Cheap Talk script, while male respondents are not affected. |
| Keywords: | Cheap Talk, Stated Preferences, Choice Experiment, Hypothetical Bias, Gender |
| JEL: | C10 C51 C90 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2010_11&r=cbe |
| By: | Berg, Nathan; Biele, Guido; Gigerenzer, Gerd |
| Abstract: | Subjective beliefs and behavior regarding the Prostate Specific Antigen (PSA) test for prostate cancer were surveyed among attendees of the 2006 meeting of the American Economic Association. Logical inconsistency was measured in percentage deviations from a restriction imposed by Bayes’ Rule on pairs of conditional beliefs. Economists with inconsistent beliefs tended to be more accurate than average, and consistent Bayesians were substantially less accurate. Within a loss function framework, we look for and cannot find evidence that inconsistent beliefs cause economic losses. Subjective beliefs about cancer risks do not predict PSA testing decisions, but social influences do. |
| Keywords: | logical consistency; predictive accuracy; elicitation; non-Bayesian; ecological rationality |
| JEL: | D6 D8 |
| Date: | 2010–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24976&r=cbe |